Dirk Helbing argued in his paper "Modeling and Optimization of Production Processes: Lessons from Traffic Dynamics" (2003) that we can draw parallels between road traffic and production processes. Helbing does particularly mention "the presence of moving entities (persons or objects) which interact in a non-linear way" and the presence of a "competition for limited resources" (such as capacity, time or space) in order to justify this approximation. I want to argue that we can extend this approximation by saying that we can assume road traffic to represent a reference model for the whole economy, of course bearing in mind the simplifications that have to be made in order to justify this step.
Optimization is a key incentive that is present in both systems. Consumers, firms and governments aim to optimize their respective key parameters, i.e. their utility, profits or social welfare. In order to do so, they try to gain competitive advantages by making use of past experiences. Participants in road traffic usually aim to optimize the time it takes them to get from A to B (which can be seen as trying to minimize the cost of getting from A to B). This may involve picking a particular time of the day for the journey, but assuming that most working parts of the population do not have the freedom to make this choice, this optimization process is mainly about picking the right route. Neil Johnson puts it that way: Road traffic can be seen "as a collection of decision-making objects repeatedly competing...to find the least crowded route from A to B" (Johnson, Simply Complexity). Hence it seems as if the incentive-structures are similar in both systems.
To further see this imagine the situation of an individual firm in the economy when it has to decide about whether or not to enter a particular market. This is similar to an individual driver's decision of whether or not to enter a particular road. In a similar manner consumers have to decide how much to consume and how much to save for future consumption. In the economy individuals are constantly faced with "Choose -a-route" problems, the difference is simply that in the case of road traffic the number of problems narrows down to one. All these decisions seem to have to do with an optimal allocation of the resources that are available to individual agents.
Also the character of possible interventions in the system is of similar nature. Central banks try to influence the economy through monetary policy (such as interest rates), governments try to stimulate or slow activity down through fiscal policy and regulation. In the same manner, road planners try to optimize traffic flow through speed limits, lights and the general traffic structure.
How do the emerging macroscopic phenomena compare? In the aggregate economy they are visible in form of sudden starts and stops in economic activity. In road traffic we can observe the sudden appearance and disappearance of traffic jam. Traffic jam as such is a inherent inefficiency of road traffic (just like stops of economic activity or recessions) and a lot of the following will look at different ways in which complexity science models traffic jam and thereby explains the occurrence of these inefficiencies. Here it might be important to note that this UROP is particularly interested in inefficiencies that arise within the system, meaning that arise without external influence. It is especially the appearance and disappearance of traffic jam out or sudden starts and stops that does not have an external cause (such as construction sites, accidents or a change in monetary policy) that is of particular interest.
So the main parallels that seem to justify the introduction of road traffic as reference model for the aggregate economic behavior seem to be the following:
- The inherent incentive structure: Optimization as a key component of both systems
- The nature of the problems that agents face: "Choose-a-route"
- The nature and means of interventions that institutions try to make are similar.
- Emergent phenomena are of similar nature and can arise within the system without any external influence
At this point it might be important to note that this approximation is of course limited. It does not seem to be clear how added value, a key component of economic activity, could arise within road traffic. I do not really have an answer for that.
Even though there might be more points that will make the approximation less powerful, I still believe that it is sufficient for the purposes of this project. I am aiming to introduce various ways in which road traffic can be modeled and extract some key factors that these models lists for the appearance of traffic jam. I will then look at a different complex system, the behavior of ants, birds or a fungus, and see what we can learn from their behavior about inefficiencies in road traffic and in the aggregate economy.
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